It has been a rough ride in the public market so far for the artificial intelligence software company
Launched with a bang last December, C3.ai (ticker: AI) priced its initial offering at $42 a share, above the originally expected range of $36 to $38 a share, and opened for trading at an even $100.
A few weeks later, the stock traded as high as $183.90 on an intraday basis, but the path has generally been downhill from there. On Monday, the stock closed at $59.59, off about 68% from the all-time high. On Tuesday, C3.ai shares were down 2.4% to $58.19.
Morgan Stanley analyst Sanjit Singh sees risks of a further decline. On Tuesday, he reiterated his Underweight rating on the stock, while cutting his target price to $60, from $100. The call comes just ahead of C3.ai’s earnings report for its fiscal fourth quarter, which ended in April, due on June 2.
The company has forecast revenue of $50 million to $51 million, with a non-GAAP loss from operations of $27 million to $28 million. The consensus view on Wall Street is that revenue will be $50.6 million, with a loss of 26 cents a share.
Singh said that revenue growth for the full fiscal year is likely to be about 16%, down from 71% a year earlier, given C3.ai’s “heavy exposure” to companies severely hurt by the pandemic, plus the restructuring of its contract with major customer
He thinks C3.ai can return to growth of more than 30% for fiscal 2022.
For the full year, the Street sees revenue of $181.5 million. The consensus call for fiscal 2022 is that revenue will be $240 million, up about 32%.
Singh said that the biggest challenge for C3.ai is its highly concentrated revenue stream, with only about 30 customers, plus a handful of go-to-market partnerships that are still just getting off the ground.
Even after the pullback in the stock, C3.ai looks pricey, at more than 24 times the Street consensus forecast for fiscal 2022 sales. Singh says that he would need to see a consistent series of quarters in which results beat forecasts and management raised its guidance, a maturing go-to-market strategy, and a diversifying customer base in order to become more positive about the stock.
Write to Eric J. Savitz at [email protected]